IRS slow to tell taxpayers when their information was disclosed

Just as the Obama administration seeks to protect consumers from breaches of personal privacy, the IRS is being told that it's too slow to tell taxpayers when their personal information wasn't kept private.

In a report released July 14, the Treasury Inspector General for Tax Administration (TIGTA) chastised the IRS for taking too long to inform taxpayers, or not telling them at all.

Auditors reviewed 98 cases involving inadvertent disclosures of personal information from fiscal years 2009 and 2010 and found that 35 cases involved failing to notify the taxpayer or failing to do so within 45 days of the exposure. The average notification took 86 days in the sample, the report said.

Meanwhile, the administration proposed legislation in May that would require businesses to tell their customers within 60 days if personal information was disclosed.

Identify theft is the most frequent complaint handled by the Federal Trade Commission, with more than 1.3 million received since 2006, the TIGTA report said.

IRS records show 4,081 inadvertent disclosures processed in fiscal years 2009 and 2010. Of these, 1,493 incidents required that 2,812 taxpayers be notified, the report said.

TIGTA also pointed to an additional 815 potential inadvertent disclosures after reviewing four systems used to capture such incidents. These were not previously identified by the IRS.

"Taxpayers need to be assured that the IRS will promptly notify them of inadvertent disclosures of their confidential information, so they can take appropriate steps to protect themselves from identity theft or other harm", said J. Russell George, the Treasury Inspector General for Tax Administration, in a statement.

TIGTA made four recommendations, which the IRS agreed with, for better employee education, procedure revision and the introduction of new timeliness measures and controls.